Mortgage After Chapter 7 Bankruptcy On Home Loans
This BLOG On Mortgage After Chapter 7 Bankruptcy On Home Loans Was UPDATED On October 7th, 2018
Looking for a Mortgage After Chapter 7 Bankruptcy?
- For many individuals, filing Chapter 7 Bankruptcy is closing one chapter in life and opening new doors of opportunity
- There is a stigma attached to filing and going through a Chapter 7 Bankruptcy
- For many, it is a lack of understanding of what drove someone to that point
- Individuals may become reluctant to apply for any type of credit after a Chapter 7 Bankruptcy Discharge
- This is because they fear rejection and become embarrassed
Steps In Qualifying For Mortgage After Chapter 7 Bankruptcy
Many potential home buyers think mortgage after Chapter 7 Bankruptcy is not possible so they do not even try. Every loan program has its own waiting period requirements to qualify for mortgage after Chapter 7 Bankruptcy discharged date.
There are two parts in when qualifying for mortgage after Chapter 7 Bankruptcy.
- If you just file Chapter 7 Bankruptcy, there is a two year waiting period to qualify for a FHA Loan after the discharged date
- There is a four year waiting period to qualify for a Conventional Loan after a Chapter 7 Bankruptcy discharged date
- Waiting period is 3 years after discharged date on USDA Home Loans
- If you had a mortgage as part of a Chapter 7 Bankruptcy, there is a three year waiting period from the recorded date of housing event on FHA and USDA Loans
- There is a two year waiting period after Chapter 7 Bankruptcy discharged date to qualify for VA Home Loans
- Housing event is the following:
- deed in lieu of foreclosure
- short sale
Mortgage Included In Bankruptcy Guidelines
There are mandatory waiting period after the Chapter 7 Bankruptcy discharged date to qualify for a FHA, VA, USDA, and Conventional Loans:
- If you had a mortgage included Chapter 7 Bankruptcy, there is a four year waiting period to qualify for a Conventional Loan and VA Loans after the discharged date of bankruptcy
- The deed of the property that was included in the Chapter 7 Bankruptcy can be recorded after the discharged date of the Chapter 7 Bankruptcy
- This rule is different than those of FHA Loans, and USDA Loans
- If the mortgage included in Chapter 7 Bankruptcy was a VA Loan, it may affect VA Entitlement on new VA Mortgage
Can A Person Qualify For FHA Mortgage After Chapter 7 Bankruptcy?
Can a person qualify for a FHA Mortgage After Chapter 7 Bankruptcy?
- The good news to this question in YES!
- HUD, The United States Department Of Housing And Urban Development which is the parent of the Federal Housing Administration or FHA
- HUD allows borrowers to obtain a qualified mortgage that is insured by HUD, called FHA Loans, after satisfying a two year mandatory waiting period after a Chapter 7 Bankruptcy Discharge Date
Preparing For FHA Mortgage After Chapter 7 Bankruptcy
What should I do during the two year waiting period to prepare yourself for mortgage after Chapter 7 Bankruptcy?
- A person who has had a prior Chapter 7 Bankruptcy Discharged should make sure that they responsibly rebuild credit
- Re-establishing credit should be done immediately after the discharge of the Chapter 7 Bankruptcy
- This can be obtained by opening a secured credit card or obtaining an unsecured credit card
- Obtaining an unsecured credit card right after a Chapter 7 Bankruptcy Discharge will most likely not happen
- Most unsecured credit card credit card companies will require a credit scores of at least a 700 FICO
- However, borrowers can start re-establishing credit by getting secured credit cards
- Preferably three to five with at least a $500 credit limit or more
- Secured credit cards are the best, easiest and fastest tools in re-establishing credit and improve credit scores after a Chapter 7 Bankruptcy
- During this period, consumers should show responsible use of credit
- This is easily accomplished by making sure to make regular payments and never being 30 days late
- To obtain the highest FICO score advantages, it is important that credit card usage stays under 10% of the credit limit
Mortgage After Chapter 7 Bankruptcy With Late Payments After Discharged Date
Majority of lenders will not approve anyone for a FHA Loan if the borrower has had any late payments after a bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale.
- This holds true no matter how high their credit scores are
- Consumers need to religiously monitor their payment history after a Chapter 7 Bankruptcy Discharge Date
- Make sure they do not have any late payments period
- There are lenders that will accept one or two late payments after a Chapter 7 Bankruptcy discharge, foreclosure, deed in lieu of foreclosure, or short sale
- But the majority of them will require a 7 year waiting period after any late payments after a bankruptcy and/or housing event
Late Payments After Bankruptcy And Housing Event Is Considered As Second Offender By Most Lenders
It is extremely important that there are not any late payments.
- It is also important not to have new collections accounts show up after bankruptcy and/or housing event
- Filing for bankruptcy can be life changing and difficult
- However, individuals who demonstrate responsible credit use and an established payment history during the two year waiting period, should not have any issues obtaining a mortgage for home purchase
About The Author
Gustan Cho is the Editor In Chief of Gustan Cho Associates Real Estate And Information Center as well as a licensed mortgage loan originator.
- Gustan Cho is an expert in helping home buyers with less than perfect credit scores and higher debt to income ratios
- The Gustan Cho Team specializes in originating, processing, underwriting, and funding FHA, VA, USDA, and Conventional Loans with no overlays Gustan Cho Associates has NO FHA Investor Overlays
- Over 70% of Gustan Cho Associates borrowers are folks who were told that they do not qualify with their lender they went to due to overlays
- For example, HUD requires a minimum credit score of 580 FICO to qualify for a 3.5% down payment FHA Loan
- However, if a home buyer visits his or her local bank and applies for a FHA Loan with a 580 FICO credit score, the banker will tell them that they do not qualify for a FHA Loan with them
- This is because most banks have FHA Investor Overlays on credit scores where the minimum credit score they require is 640 FICO
- The Gustan Cho Team of mortgage loan originators will be able to help borrowers get FHA Loans approved
- We are known nationally due to its no lender overlays
Please contact Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at firstname.lastname@example.org if you need to consult with a loan officer with no lender overlays on FHA, VA, USDA, and Conventional Loans.